(Yicai Global) Nov. 27 -- Chinese local governments and financial firms have invested over CNY500 billion (USD71.9 billion) to set up bailout funds for private companies that are struggling with the aftermath of risky borrowing, including options such as shadow banking and equity pledging. 

The State-owned Assets Supervision and Administration Commissions of the State Council, as well as local governments in 17 provinces, including Guangdong, Zhejiang, Fujian and Henan, have drafted relief measures, one of them being a CNY256 billion bailout fund, according to incomplete statistics that Securities Daily compiled and published.

This year, the country's regulators have started to tighten up on shadow banking, which has led shareholders of private firms to pledge their stocks as collateral for loans, which in turn has risked them losing the ownership of the company once the loans default.

Some think that bailout funds are not enough to solve the underlying problems. Resolving private companies' difficulties involving high financing costs and other issues should not simply rely on the bailout funds but call for in-depth reforms, said Liu Zhe, a deputy head of research lab WanB Institute. 

Asset managers have contributed over CNY70 billion (USD10.1 billion) to the firm owners' plight. Some 15 brokerage firms, including Everbright Securities and Dongxing Securities, have signed up to invest. China Galaxy Securities has set up Galaxy Development Fund with a sum of CNY60 billion and Western Securities plans to launch its own CNY10 billion investment vehicle.

Insurance funds have injected CNY86 billion in liquidity to the system to help out the pinched firms. Some of these participating financiers include China Life Insurance, China Taiping Insurance, People's Insurance Company of China, New China Life Insurance and Sunshine Life Insurance.

The two bourses of Shenzhen and Shanghai have issued four special bonds for the cause with a sum of CNY4.3 billion (USD619 million). 

Editor: Emmi Laine